Understanding Extra-Judicial Settlement: An Essential Guide to Estate Distribution in the Philippines

The passing of a loved one can be a challenging time, and matters related to estate distribution can add complexity to the grieving process. In the Philippines, an Extra-Judicial Settlement (EJS) is an important legal process that allows the heirs to divide the estate of a deceased person without going through a lengthy court procedure. In this blog, we will delve into the concept of Extra-Judicial Settlement, its legal framework, the process involved, and its significance in estate distribution.

What is Extrajudicial settlement of estate?

Extra-Judicial Settlement is a legal agreement made among the rightful heirs of a deceased individual to divide the estate of the decedent without the need for a court order or probate proceedings. Its primary purpose is to facilitate the smooth and amicable distribution of assets among the heirs, avoiding potential conflicts and delays that may arise in a formal court setting.

Who may execute extrajudicial settlement?

1. The sole heir – The one and only heir may adjudicate the entire estate to himself by means of an affidavit (called an “Affidavit of Self-Adjudication”) filed in the Register of Deeds of the place where the decedent resided; and
2. The heirs agreeing among themselves – The heirs may divide the estate among themselves by means of a notarized instrument filed in the Register of Deeds[1].

What are the requirements for an extra-judicial settlement of estate?

1. The decedent died intestate, i.e., without a valid will;
2. The estate has no outstanding debts at the time of the extrajudicial settlement;
3. The heir/s are all of age, or the minor heirs are represented by their judicial guardians or legal representatives;
4. The extrajudicial settlement is made in a public instrument, stipulation or affidavit duly filed with the Register of Deeds;
5. The fact of such extrajudicial settlement must be published in a newspaper of general circulation once a week for three (3) consecutive weeks; and
6. The parties to the extrajudicial settlement shall file a bond with the Register of Deeds in an amount equivalent to the value of the personal property involved.[2]

What are the remedies of an unpaid creditor after extrajudicial settlement of estate?

If the excluded party is an unpaid creditor of the estate, his remedies are:

1. To institute a claim by proceeding against the bond within 2 years after the distribution and settlement of the estate of the deceased.[3] After the lapse of the two-year period, the creditor may no longer proceed against the bond but can institute an ordinary action against the distributees within the statute of limitations.
2. To file a Petition for Letters of Administration and file an action to annul a deed of extrajudicial settlement on the ground of fraud within 4 years from discovery of fraud; and
3. To institute a claim by proceeding against the real estate belonging to the deceased, notwithstanding any transfers of real estate that may have been made. [4]

What are the remedies of an excluded heir after extrajudicial settlement of estate?

The remedies of an excluded heir after extrajudicial settlement of estate are as follows:

1. Within 2 years:
   1. Compel settlement of the estate if an heir or other person has been unduly deprived of his lawful participation in the estate; or
   1. File a claim against the bond or real estate or both if there are unpaid debts;[5]
2. Rescission in case of preterition of compulsory heir in partition tainted with bad faith[6];
3. Reconveyance of real property – An heir deprived of one’s share because of non-participation may file an action for reconveyance within 10 years, which is based on an implied or constructive trust.[7]
4. Action to annul a deed of extrajudicial settlement on the ground of fraud which should be filed within 4 years from the discovery of fraud; or
5. Petition for relief on the ground of fraud, accident, mistake, excusable negligence – 60 days after the petitioner learns of the judgment, final order or other proceeding to be set aside, and not more than 6 months after such judgment or final order was entered[8].

What are the steps in executing extrajudicial settlement?

1. Preparation of the “Deed of Extrajudicial Settlement of Estate and Adjudication of Estate”. It must be signed by all of the heirs, alleging the following information:
   1. That the decedent left no will;
   1. That the decedent left no debt;
   1. Each heir’s relationship to the decedent
   1. That they are the decedent’s only surviving heirs;
   1. Enumeration and brief description of the deceased’s properties, both real and personal, which the heirs are dividing among themselves.
   1. How the mentioned properties are to be divided among the heirs.
2. Notarization of the deed.
3. Post a bond from a reputable bonding company acceptable to the Register of Deeds.
4. Registration of the notarized deed.
5. Publish the deed in a newspaper of general circulation once a week for three (3) consecutive weeks.

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[1] Section 1, Rule 74 of Rules of Court.

[2] Ibid.

[3] Ibid.

[4] Section 4, Ibid.

[5] Ibid.

[6] Article 1104, The New Civil Code of the Philippines.

[7] Teves v. CA, G.R. No 109963, October 13, 1999.

[8] Rule 38, Rules of Court.